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Covered San Francisco plan would bridge gaps between Healthy San Francisco and Obamacare

The whole point of Healthy San Francisco, the city’s universal healthcare program, is to help people who can’t afford health insurance get medical care when they need it. Despite the intentions of expanding access to healthcare under the Affordable Care Act, that goal won’t necessarily be realized now that federal reform is underway.

Lately, we’ve gotten reports of San Franciscans hoping to enroll in Covered California, the state-run health insurance marketplace created under the ACA, leaving meetings with enrollment counselors in tears of frustration. Even though these would-be enrollees are technically eligible for Covered California – which makes them ineligible to stay in Healthy San Francisco – the insurance cost is nevertheless too high to be a realistic option.

“The most authoritative study says 40 percent of San Franciscans who are eligible for Covered California still will not be able to afford it,” Sup. David Campos noted in a recent phone interview. At the tail end of a long Board of Supervisors meeting on Tuesday, Campos introduced legislation that would create “Covered San Francisco,” a health care option designed to remedy this coverage gap. “In high cost-of-living cities like SF, many will simply not be able to afford it,” Campos said when he introduced the legislation.

The legislation is co-sponsored by Sups. John Avalos, Eric Mar, and Jane Kim. Drafted along with a team that included experts in healthcare and representatives from the city’s Department of Public Health and City Attorney’s Office, the proposal essentially does three things.

First, it seeks to close a loophole that incentivizes employers to comply with the city’s health care law in a way that makes it harder for employees to access medical care.

Under the Health Care Security Ordinance, the law that created Healthy San Francisco, employers must contribute toward their workers’ healthcare costs based on hours worked. In the past, they could comply by setting up standalone accounts, called healthcare reimbursement accounts (HRAs). If employees never tapped those accounts for healthcare needs, the businesses could take back the money they put in.

Under Obamacare, those standalone HRAs are now illegal. But some employers have discovered that they can still set up a different kind of HRA, called an “excepted benefits HRA,” which can only be used toward ancillary care like vision or dental needs.

For employees who are sick and need some kind of medical coverage, these “excepted benefit HRAs” can result in a bind, because under the new federal law, workers are expressly prohibited from using them to obtain insurance through Covered California. And, if employees don’t spend what’s in these accounts, employers can still take the money back – making this option very attractive to employers looking to reduce spending.

Therefore, Campos’ legislation seeks to make all spending to satisfy the local health care law irrevocable, meaning the employers cannot take it back.

“While individuals will face a federal mandate for the first time to purchase health insurance, they will not be able to use these accounts in these excepted benefit HRAs to actually meet that mandate,” Campos pointed out, saying the legislation seeks to do away with “this perverse incentive” for employers to set up HRAs instead of going with an option that would aid employees in seeing a doctor when needed.

This change would leave employers with the choice of keeping ever-expanding HRAs on their books – which is a liability – or looking for a different way to comply with the city’s healthcare law. Other options include providing insurance for their employees, or paying into a locally administered health-care program known as the “city option.”

Many employers already use this city option, and Campos’ proposal would change how it works. First, workers would sit down with city health officials for a consultation. From there, if workers were eligible for Covered California, they’d be enrolled, and they would get additional subsidies to make it more affordable. This system would be known as Covered San Francisco.

Workers not eligible for Covered California, such as undocumented residents, would be enrolled into Healthy San Francisco. And healthcare accounts would be set up for those who didn’t fall into one of the other two categories.

The third thing the law would do is require the city’s health department to extend Healthy San Francisco coverage to include anyone not already covered by the ACA, either due to economic hardship or because they lack an affordable health insurance option.

Already, the newly introduced legislation has some detractors in the Golden Gate Restaurant Association, a business entity that sued the city several years ago to challenge employer requirements under Health Care Security Ordinance.

Gwyneth Borden, executive director of the Golden Gate Restaurant Association -- which brought and unsuccessful legal challenge to HCSO when the city adopted it -- said her group takes issue with the idea of making HRA spending irrevocable. “The irrevocability does limit the choices – the city is trying to force the hand of the employer, to choose the city option,” she said. “The city’s making it more restrictive.”

She also said the GGRA was concerned about transparency. “What they’re saying is that … that entire cost wouldn’t have to sit in an account for an employee; it would fund the system,” in the event that an employer selected the city option, Borden said. “If they’re arguing that the employer has to spend every cent of the dollar on health care for the employee, then the city should have to do that as well.”

But Borden said GGRA had litigated on this issue before, and therefore would not be able to bring their opposition to the courts again. Borden also added that GGRA wanted to make one thing clear: “We applaud Sup. Campos’ efforts to broaden the city option,” she said, “and get more people health care.”